Wireless Prague : A Lesson for Other Muni-Wireless Projects in Europe

Even as the controversies regarding Prague's municipal wireless network (Wireless Prague) remain unresolved despite the European Commission's approval at the end-of-May on the use of public funds for the project, there seems to be another dispute brewing in Europe. France Telecom, one of France's main telecom operators, filed a complaint last week against the city of Paris for allowing free Wi-Fi access in about 105 public areas that the Town Hall of Paris (the municipality) announced on July 16. This roll out is the first phase of "Paris WiFi", a free citywide wireless project initiated and funded by the municipality, which has an ambitious plan to allow free Wi-Fi access in 400 public spaces like libraries, museums and parks by the end of August.

But while the Paris municipality regards this network as a public utility and claims that the Wi-Fi service does not provide unfair competition to private telecom operators (since the services would be restricted to public places during opening hours), France Telecom, which owns 2250 paid-for hotspots throughout the city, has sued the Town Hall in the administrative Court alleging that the roll out is illegitimate. According to FT, since there are adequate Wi-Fi services available in the whole of Paris already, the municipality's free wireless service distorts competition.

Indeed broadband services and networks are evolving fast, moving Europe towards a "knowledge based society." Here many public initiatives are taking place at national, regional or even at local levels -- there are about 30 of them under implementation or being envisaged to advance the development of fast Internet access and the widespread deployment of broadband infrastructures. But, although such initiatives are in line with making broadband access crucial for growth and quality of life, many such initiatives will inevitably clash with private investments.

It is time now then, says Audrey Lemonnier of the European Commission, to raise the pertinent question of "whether a public authority has to build and operate its own network rather than procuring broadband services from the market, when such services are abundantly available."

So is there a lesson to be learnt from the EU decision on 'Wireless Prague', which according to the European Commission is the first municipal wireless project in Europe to be subject of arbitration?

"Primarily," says EU Competition Commissioner Neelie Kroes, "investment in broadband networks is a matter for private companies. [But] subsidies for such networks are acceptable only if they address a well-defined market failure or cohesion problem."

In that respect the decision of the Prague project gains considerable importance because in that decision the EC has clarified when a public authority (like a municipality) may set up its own network even when there are "adequate services available from private network operators."

It is important to note here that while the EC encourages State intervention in broadband networks to bridge the "digital divide" between more affluent areas and remote regions without appropriate broadband services, it is also concerned about the fact that a "State intervention does not crowd out existing and future investments by market players." This is the main reason why the EC has crafted a concept of "State Aid" under Article 87(1) of the EC Treaty, which ensures that "state grants provided to an undertaking or groups of undertakings which would not have been granted under normal market conditions, does not distort competition and trade."

According to the EC, the mere fact that a municipality decides to "build its own public-sector network in order to satisfy its own needs for Internet connectivity instead of procuring such services from private operators does not raise concerns under Article 87 (1) of the EC Treaty," since that is an autonomous organizational decision by a public authority.

Moreover, it isn't a problem either if a public authority builds its network for providing public services (like e-Government) for free. "The Czech authorities informed

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